The recent banking sector turmoil has soared investor anxieties and raised the odds of an impending recession. Against this backdrop, stocks with significant upside potential, such as Gilead Sciences, Inc. (GILD), Teva Pharmaceutical Industries Limited (TEVA), and MacroGenics, Inc. (MGNX), might be solid buys for the reasons mentioned throughout the article.
The banking crisis triggered by the downfall of Signature Bank and Silicon Valley Bank has raised the odds of the U.S. economy tipping into a recession. Moreover, the failure has also fueled a “credit crunch” that could result in tightened lending standards.
Christine Benz, director of personal finance at Morningstar, commented, “I think many banks would naturally be looking to potentially [tighten standards] given worries about a recession, even without these banking issues that have come to the fore recently.
Moreover, Jim Caron, head of macro strategy for global fixed income at Morgan Stanley Investment Management, believes that the risk of a recession has rightfully increased, with equities and bond yields down.
Furthermore, according to the latest BofA fund manager survey released on Tuesday, about 42% of fund managers surveyed see a recession within the next 12 months. Also, 80% of those fund managers surveyed expected a stagflationary economy to persist. The overall economic scenario is likely to keep the stock market under pressure.
Therefore, investors could buy fundamentally strong stocks GILD, TEVA, and MGNX with solid past growth and considerable upside potential to garner significant returns.
Gilead Sciences, Inc. (GILD)
Biopharmaceutical company GILD discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally.
On February 22, Kite, a GILD company, acquired Tmunity Therapeutics, a clinical-stage biotech startup focused on next-generation CAR T-therapies and technology.
This acquisition should strengthen Kite’s in-house cell therapy research capabilities by delivering pipeline assets, platform capabilities, and a unique partnership with the University of Pennsylvania.
On February 2, GILD announced that its board of directors had declared an increase of 2.7% in its quarterly dividend, beginning in the first quarter of 2023. The increased quarterly dividend of $0.75 per share of common stock is payable to stockholders on March 30, 2023. This reflects its cash generation abilities.
In terms of forward non-GAAP P/E, GILD is trading at 11.63x, 39.2% lower than the industry average of 19.14x. Its forward EV/EBITDA multiple of 8.67 is 34.4% lower than the 13.21 industry average.
GILD’s revenue has grown at 6.7% and 0.9% CAGRs over the past three and five years, respectively. Moreover, its EBIT and EBITDA have grown at 5.5% and 6.8% CAGRs over the past three years, respectively.
GILD’s total revenues stood at $7.39 billion for the fourth quarter that ended December 31, 2022, up 2% year-over-year. Non-GAAP net income attributable to GILD and non-GAAP EPS came in at $2.11 billion and $1.67, up 143.2% and 142%, respectively. Cash and cash equivalents at the end of the period stood at $5.41 billion compared to $5.34 billion in the year-ago quarter.
For the second quarter ending June 2023, Street expects GILD’s EPS and revenue to increase 8.5% and 3.5% year-over-year to $1.71 and $6.48 billion, respectively. It surpassed consensus EPS and revenue estimates in each of the four trailing quarters.
The stock has gained 32.7% over the past year to close the last trading session at $79.14. It has gained 24.6% over the past six months. Wall Street analysts expect the stock to reach $91.40 in the upcoming 12 months, indicating a potential upside of 15.5%.
This promising outlook is reflected in GILD’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GILD has an A grade for Value and Growth and a B for Quality and Sentiment. Within the Biotech industry, it is ranked first.
Click here for the additional POWR Ratings for Stability and Momentum for GILD.
Teva Pharmaceutical Industries Limited (TEVA)
TEVA is a pharmaceutical company based in Israel. The company operates through three segments: North America; Europe; and International Markets.
On March 9, TEVA and NATCO Pharma Limited (NATCOPHARM) announced the launch of additional strengths for the generic version of Revlimid®1 (lenalidomide capsules) in 2.5 mg, and 20 mg strengths, in the United States. With the new launch, the companies made available all the strengths of lenalidomide in the U.S. market.
On March 1, TEVA announced that it had successfully upsized its offering and priced approximately $2.49 billion (equivalent) of its sustainability-linked senior notes.
TEVA’s CEO, Richard Francis, said, “Looking ahead to 2023, I am especially enthusiastic about the progress of our innovative, biosimilars and generic pipelines, which include interesting and differentiated assets. As we work on an updated strategy, we are looking for opportunities to best position Teva for long-term growth and generate value to all stakeholders."
In terms of forward EV/EBIT, TEVA is trading at 6.98x, 56.8% lower than the industry average of 16.16x. Its forward EV/Sales multiple of 1.95 is 47.4% lower than the 3.70 industry average.
During the fiscal fourth quarter that ended December 31, 2022, TEVA’s revenue came in at $3.88 billion, while its non-GAAP gross profit came in at $2.11 billion. Non-GAAP net income attributable to TEVA came in at $791 million, and non-GAAP earnings per share attributable to the company amounted to $0.71.
Furthermore, its cash, cash equivalents, and restricted cash came in at $2.83 billion for the period that ended December 31, 2022, compared to $2.20 billion for the period that ended December 31, 2021.
Analysts expect TEVA’s EPS for the fiscal third quarter ending September 2023 to be $0.60, indicating a 1.6% year-over-year growth. Its revenue is expected to increase by 3.4% year-over-year to $3.72 billion.
The stock gained 3.2% intraday to close its last trading session at $8.80. It has also gained 7.1% over the past six months. Wall Street analysts expect the stock to reach $11.40 in the upcoming 12 months, indicating a potential upside of 29.5%.
TEVA’s POWR Ratings reflect its strong prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Value and Growth. TEVA is ranked #33 within the 166-stock Medical – Pharmaceuticals industry.
In addition to the POWR Ratings stated above, we have also rated TEVA for Momentum, Stability, Sentiment, and Quality. Get all the TEVA ratings here.
MacroGenics, Inc. (MGNX)
MGNX is a biopharmaceutical company that develops and commercializes antibody-based therapeutics to treat cancer in the United States. Its approved product MARGENZA, in combination with chemotherapy, is used for the treatment of adult patients with metastatic HER2-positive breast cancer who have received two or more prior anti-HER2 regimens.
In terms of forward price/sales, MGNX is trading at 2.49x, 39.5% lower than the industry average of 4.12x. Its forward EV/Sales multiple of 1.82 is 2.2% lower than the 3.80 industry average.
MGNX’s revenue has grown at 33.3% CAGR over the past five years.
For the fiscal year that ended December 31, 2022, MGNX’s total revenues came in at $151.94 million, indicating an increase of 96.2% year-over-year. Its total cost and expenses declined 2.5% year-over-year to $273.36 million.
Its net cash provided by investing activities came in at $70.72 million for the period that ended December 31, 2022, compared to net cash used in investing activities of $36.61 million for the period that ended December 31, 2021.
Analysts expect MGNX’s revenue for the fiscal second quarter ending June 2023 to be $32.56 million, indicating a 25.2% year-over-year growth. It surpassed its revenue estimates in three of the trailing four quarters.
The stock gained 6.4% intraday to close its last trading session at $7.12. It has also gained 125.3% over the past six months. Wall Street analysts expect the stock to reach $12.29 in the upcoming 12 months, indicating a potential upside of 72.6%.
It’s no surprise that MGNX has an overall rating of B, which equates to Buy in our POWR Ratings system.
It has an A grade for Growth and a B for Value, Sentiment, and Quality. MGNX is ranked #12 within the Biotech industry.
Click here to see MGNX’s additional rating for Momentum and Stability.
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GILD shares were trading at $78.68 per share on Wednesday afternoon, down $0.46 (-0.58%). Year-to-date, GILD has declined -7.48%, versus a 4.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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